Praxair, Inc. Ray Roberge SVP and Chief Technology Officer. Citi Chemicals for the Non-Chemist Conference November 29, 2010

Transcription

1 Praxair, Inc. Ray Roberge SVP and Chief Technology Officer Making our planet more productive SM Citi Chemicals for the Non-Chemist Conference November 29,

2 Forward Looking Statement This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements are based on management s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company s Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company s forward-looking statements in light of those risks. 2

3 Global Industrial Gas Industry Total sales 2010F: ~$65 billion Linde Praxair Airgas Air Products Air Liquideid Other Consolidated industry with few large, global players Source: Spiritus Consulting 3

4 Industrial Gas Industry - Diverse End Markets Healthcare 11% Electronics 7% Food 7% Other 9% Chemicals 14% Refining 9% Metals 12% Manufacturing 31% Industrial gases are fundamental to many industries Source: Spiritus Consulting, 2009 sales 4

5 Products We Make We supply customers with atmospheric, process and specialty gases, high-performance coatings, and related services and technologies Atmospheric Gases Produced when air is purified, compressed, cooled, distilled and condensed Oxygen, nitrogen, argon and rare gases Process & Specialty Gases Produced as by-products of chemical production or recovered from natural gas Carbon dioxide, helium, hydrogen, semiconductor process gases, and acetylene 5

6 Components of Air Nitrogen 78.09% Oxygen 20.95% Argon, 0.93% CO2 0.03% Other % Neon % Helium % Krypton, % Xenon, % 00001% 6

7 Vertically Integrated System On-Site/Pipeline Supply Merchant Liquid (O 2, N 2, Ar) Packaged gas facility (pure gases, medical, specialty gas blends) 7

8 Oxygen Systems Modes of Supply 99.5 Purity % O2 Liquid Oxygen VPSA (non-cryo) Cryogenic 20 TPD 250TPD Volume Customer demand matched with optimum supply systems 8

9 Air Separation Cryogenic Distillation First commercialized in 1896 Continuous improvements and enhancements Nitrogen -320 F Air Filtration & Conditioning Argon -302 F Oxygen -297 F Air 78% N2 21% O2 1% Other Gases Purify Liquefy by cooling to -320 F Separate by distillation 9

10 Air Separation VPSA (Non-Cryogenic) First commercialized in 1960 Oxygen Adsorbent Air zeolites 10

11 Merchant Liquid Supply Systems Sized for customers specific requirements 11

12 On-site Pipeline Supply TEXAS HOUSTON LCR Valero DEER PARK BP Amoco Valero LAPORTE MONT BELVIEU BAYTOWN ExxonMobil TEXAS CITY GALVESTON PORT ARTHUR Motiva GULF OF MEXICO LOUISIANA LAKE CHARLES Citgo Conoco BATON ROUGE ExxonMobil GEISMAR HYDROGEN PIPELINE REFINERIES HYDROGEN PRODUCTION HYDROGEN STORAGE CAVERN SAFETY KLEEN AMOCO BP - AMOCO PRAXAIR PRAXAIR WHITING WHITING MITTAL MITTAL Lake Michigan Praxair Chicago Area Pipeline Enclave MITTAL MITTAL PRAXAIR EAST CHICAGO Pipeline Legend Oxygen Nitrogen Hydrogen MITTAL PRAXAIR USS LAKESIDE USS INDUSTRIAL STEEL STEEL CONSTRUCTION PRAXAIR LOW PURITY BETA REPUBLIC USS MITTAL MITTAL PX PX LH2 LH2 PRAXAIR BURNS HARBOR Pipeline enclaves offer highest returns and customer reliability 12

13 Hydrogen a Process Gas Praxair Steam Methane Reformers Port Arthur, TX 100 MMSCFD Texas City, TX 100 MMSCFD Steam Methane Reforming H2O + CH4 3H2 + CO 13

14 Strong Growth Outlook for Hydrogen Developed markets Environmental fuel standards Efficiency/flexibility/reliability Shift to diesel Refining Capacity Growth ( ) US/Europe 2% Emerging Markets Greenfield refining capacity Adoption of Euro fuel standards Heavy/sour crude capability H 2 for chemicals India 15% China 20% Middle East 24% Trend toward outsourcing Brazil 25% Praxair targeting 3 B scfd of hydrogen supply Source: Purvin & Gertz, Praxair estimates 14

15 Role of Technology at Praxair We continually drive cost reduction New supply systems with reduced capital and operating cost Efficiency of existing infrastructure We grow our business by developing and commercializing new applications technologies Existing customer base looking for solutions Expand our markets Industrial gas solution typically y lower capital or operating cost New technologies drive growth and cost reduction 15

16 Continuous Improvement in Plant Design Product line plants Product Line Plants >90% of plant builds Low Purity Oxygen Flexible platforms Increased sizes for gasification Technology Roadmap Distillation Heat transfer Pre-purification TPD High Purity Oxygen Oxygen Cost Index ($ per ton O 2 ) 2006 Turbomachinery Up to 30% 45+ programs through improvement over % capital and energy savings p.a Plant Size (TPD) 3,000TPD 16

17 Applications for Industrial Gases Increase energy efficiency Oxy-fuel combustion Higher productivity Throughput, yield Improve environmental performance Air Water Oxy-fuel combustion Food freezing Wastewater treatment Renewable biofuels ~2-3% per year sales growth from high margin applications 17

18 Increasing Gas Intensity Two Examples Argon Intensity - Welding (CF argon per lb consumables) O 2 Intensity - Steel (scf O 2 / ton steel) W. Europe Increasing Blast Furnace injection Stove Oxygen and DOC 5 United States Water Cooled lances Burners Foamy Slag CoJet DOC 0 China Integrated Mills Minimills Industrial gas intensity increasing with new applications Source: Praxair estimates 18

19 Unique Revenue Model On-Site/Pipeline 24%* Merchant Liquid 29%* Packaged/Medical 31%* 15 year take-or-pay contracts Indexed to energy, inflation, currency Exclusive supply agreements Sourced as by-product from on-site Cylinder and equipment rental Sourced as by-product from bulk Integrated supply & contract terms drive high ROC *2009 sales 19

20 Production and Distribution Density Praxair: Strongest t North thamerican supply system On-site and Bulk Gases 300 production plants 8000 customer locations 1500 distribution vehicles 11 pipeline enclaves Packaged and Specialty Gases 400 distribution facilities >400,000 customers 1000 distribution vehicles 83 filling stations Distribution Locations Homecare Locations Merchant Plants Carbon Dioxide Plants Specialty Gas Plants Pipeline Major Pipeline Systems Systems Distributors Helium Transfill Dry Ice Illustrative 200 Mile Radius drives reliability, growth, and profitability 20

21 Praxair Key Growth Drivers Increasing domestic consumption; infrastructure development Mi ti li ti t h l i Outsourcing of captive production Emerging Economies Migrating application technologies Energy Global growth of refinery hydrogen Coal gasification in China Enhanced oil recovery Environment Air, water, waste regulations Development of alternative fuels Potential GHG regulations 21

22 Long-Term Growth Outlook Annual Organic Sales Growth +8-12% Project Backlog Major projects >$5MM capital $2.5 B Est. $2.0 B On-site 3-5% project backlog $1.0 B December 2006 December 2008 December 2010F 2-3% Applications and technology transfer 3-4% Base business follows IP* Generates 12-18% annual organic EPS growth *Industrial production 22

23 Unique and Profitable Business Model No commodity pricing Long-term contracts high renewal rates Raw material cost pass-through No speculative capex High value, low cost product reliability is key Production/distribution density drives returns Applications technologies drive growth above Industrial Production Secular growth trends energy production, environmental legislation and emerging market infrastructure development 23

24 Steady Earnings Growth Through Economic Cycles Indexed EPS 16% CAGR Praxair 8% CAGR S&P F* Recession *Source: Thomson First Call 24

25 Principles of Sustainable Development Governance and Integrity Maintain strong systems and a culture of global corporate governance, compliance, ethics, human rights, integrity and accountability. Strategic Leadership Stay current with, and take advantage of, emerging global opportunities, developments and challenges to position Praxair for the future. Customer Commitment Focus relentlessly on the delivery of customer value through continuous innovation that helps our customers enhance their product quality, service, reliability, productivity, safety, energy efficiency i and environmental performance. Environmental Responsibility Achieve continuous environmental performance improvement and energy efficiency in our operations. Employee Safety and Development Provide opportunities that allow employees to develop to their fullest potential in a creative, inclusive and safe environment. Community Support Participate in community development in regions where we operate. Financial Performance Maintain year-on-year recognition from shareholders and stakeholders for top-tier financial performance. Stakeholder Engagement and Communication Partner with internal and external stakeholders to achieve a strong, secure and sustainable society, economy and environment. 25

26 APPENDIX 26

27 Glossary LIN/LOX/LAR Liquid nitrogen, liquid oxygen and liquid argon Cryogenic -A state of extreme cold characterized by low temperatures, usually -130 F (-90 C) or below Air Separation Unit (ASU) A cryogenic air separation unit typically ranges in size from 50 to 5000 tons per day, capable of producing high purity gaseous O 2, N 2 and Ar, when equipped with a liquefier can also produce LIN/LOX/LAR N-Plant - A Praxair acronym for plants that use cryogenic distillation columns to produce ultra high purity nitrogen only. Non-cryogenic - An air separation process that operates at near-ambient temperatures and uses physical property differences other than boiling point, such as molecular l size and mass, to produce commercially valuable gaseous products such as nitrogen and oxygen. Typically lower purity than cryogenic Membrane Plants -. A non-cryogenic technology that uses hollow-fiber polymer membranes to separate gaseous nitrogen from air by selective permeability. 27

28 Glossary cont. Vacuum Pressure Swing Adsorption (VPSA) - AP Praxair acronym for noncryogenic oxygen plants. VPSA plants use one or two molecular sieve-filled beds to hold all the impurities of air and allow purified oxygen to pass through. Steam Methane Reformer (SMR) - A reaction of natural gas (methane CH4) or other light hydrocarbons (ethane or propane) with steam for the on-purpose production of hydrogen and/or carbon monoxide. Pressure Swing Adsorption (PSA) Advanced H 2 purification technology Partial oxidation - A reaction of hydrocarbons (such as natural gas, naphtha, petroleum coke or coal) with oxygen to produce hydrogen and carbon monoxide Integrated Gasification Combined Cycle (IGCC) Most advanced (clean coal) power generation technology Gasification Partial oxidation of hydrocarbons to produce synthesis gas Synthesis Gas Combination of H 2 and CO 28

29 Praxair Air Separation Units (ASUs) SOPO 3000 TPD Texas City, TX 1800 TPD 29

30 Air Separation Non-Cryogenic VPSA 30

31 Praxair Pipeline Complex Burns Harbor, IN; Northwest Indiana pipeline complex ~12,000 TPD 31

32 Packaged Gases 32